Strategesis

From Safehaven.com:

Any new stock bear today has to be cyclical. The US stock markets (as measured by the flagship S&P 500 stock index (SPX)) soared 102% higher between March 2009 and April 2011 in a powerful cyclical bull. So a cyclical bear is certainly due next when the past-couple-years’ bull inevitably gives up its ghost at some point. Is that time now? Maybe, but we don’t have a high-probability new-bear setup yet.

Continued

From Safehaven.com:

Reading the technical tea leaves results in the picture of a market which may soon be ready to have a short-term uptrend, but which will probably have to spend some additional time completing an intermediate correction that may have started with the 1344.07 top in mid-February. This is the thinking of Tony Caldaro, and I believe he is right. That is the date on which the financial index made its recent high. The move to 1370 was premature, and this why the market needed additional corrective action.

There are some cycles bottoming in the Fall which may help the indices to complete their intermediate correction in that time frame, followed by a final bull market top in 2012.

Continued

From Safehaven.com:

Last week, the SPX shed another 29 points. This brings the index to a total decline of about 100 points in the space of six week. Is it done yet? Before we get into that, let’s ask an expert what kind of a decline this is. At the 1370 top, the VIX was at about 14. In the course of the downtrend, it reached a high of about 20. And last Friday, it closed just below 19.

Clearly, Mr. VIX is not too worried about the extent of this correction. During last year’s intermediate correction, the VIX went from about 15 to a high of about 48. If this is how the VIX behaves in an intermediate correction, we have to deduce that we are not in one, but only in an extended short-term correction period, and that the intermediate trend is most likely still up! Of course, the VIX could still wake up and forecast much more decline ahead but, until it does, we have accept what it is telling us and not dwell on what it is not.

Now, is it done yet? We can ask another expert: The SentimenTrader what it thinks, and its answer is: “I can’t tell you that exactly because I am not a timing indicator, but I feel that we are pretty darn close!” (We’ll see a picture of the “SentimenTrader” a little later on.)

That’s too vague! Perhaps we can get more specific answers, from our charts.

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From Safehaven.com:

…what happens if an oversold market doesn’t bounce and the selling continues?

The answer: oversold becomes more oversold, and like the overbought market that gets stuck in “overbought”, a new trend is likely to form. In this case, it would be a downtrend. And that is the juncture this market finds itself in.

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From Safehaven.com:

Every time there is a correction in the stock market after it has had a good run, there is a lot of speculation that it might be the beginning of an important decline. This is the case again today, especially when there are signs that the economy is slowing down. Last Friday, the unemployment rate ticked up to 9.1%, and the number or jobs created fell to 54K, far below the previous month’s report of 232K, and far worse than what had been anticipated, and this was only one of several negative economic reports.

Since the SPX filled its phase count of 1370 five weeks ago, the indices have been correcting. But there is no technical evidence that the equity indices are at the end of the bull market which started March 2009, or even that it has started an intermediate correction (yet), for that matter! This is what I intend to demonstrate in this newsletter. We’ll look at the weekly, daily and hourly charts of the SPX, as well as sentiment.

From Safehaven.com:

On Tuesday 5/24 the SPX started another near-term uptrend from 1312 which reached 1333 by the end of the week. Is there any chance that this rally becomes a legitimate end to the correction? Maybe! Because the 14-15-wk high-to-high cycle is due to top in about a week and, assuming that it is the cause of this rally, and that it will bring about a high and not a low, the upward push could extend by several more points until the cycle has made its high (ideally 6/6). Then, a reversal should take place, perhaps bottoming on 6/13, the date on which the Armstrong 8.6-yr cycle is due.

Using cycles for market forecasting can be helpful, but I have learned to take them with a grain of technical salt, meaning that, based on experience, I take the cycles into consideration, but rely primarily on what my technical indicators are saying; especially when several cycles are clustering in a narrow time frame (like now) — and some of them have a history of inverting!

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From Safehaven.com:

The near-term pattern which is being made by the SPX suggests that the low of the correction may have been 1319, and that a break-out from its corrective channel may be imminent.

This is supported, in part, by the sentiment index which has grown more bullish over the last week, and the charts of GLD and USO which may be ready to start retracing their recent decline.

If the SPX extends its down-move below 1328, it will put the break-out scenario in doubt or, at least, delay it.

Continued